Archrock Reports Fourth Quarter and Full Year 2021 Results and Provides 2022 Guidance
HOUSTON, Feb. 22, 2022 (GLOBE NEWSWIRE) -- Archrock, Inc. (NYSE: AROC) (“Archrock”) today reported results for the fourth quarter and full year 2021 and provided 2022 financial guidance.
Fourth Quarter and Full Year 2021 Highlights
Revenue for the fourth quarter of 2021 was $195.2 million compared to $199.3 million in the fourth quarter of 2020. Revenue for 2021 was $781.5 million compared to $875.0 million in 2020.
Net income for the fourth quarter of 2021 was $6.0 million compared to $4.8 million in the fourth quarter of 2020. Net income for 2021 was $28.2 million compared to a net loss of $68.4 million in 2020.
Adjusted EBITDA (a non-GAAP measure defined below) for the fourth quarter of 2021 was $83.5 million compared to $88.7 million in the fourth quarter of 2020. Adjusted EBITDA for 2021 was $360.8 million compared to $414.8 million in 2020.
Previously-declared quarterly dividend of $0.145 per common share for the fourth quarter of 2021 resulted in dividend coverage of 2.0x. Dividend coverage for 2021 was 2.2x compared to 2.9x in 2020.
Leverage ratio was 4.3x at year end 2021 compared to 4.2x as of December 31, 2020.
Net cash provided by operating activities and free cash flow after dividend for 2021 were $237.4 million and $164.2 million, respectively.
Management Commentary and Outlook
“As the market continues to strengthen and execution by team Archrock remains excellent, we delivered a sequential increase in our contract operations revenue as well as our highest quarterly levels of operating horsepower growth and bookings for the year during the fourth quarter. We closed out 2021 generating positive net income and record annual free cash flow at the bottom of the cycle,” said Brad Childers, Archrock’s President and Chief Executive Officer. “More broadly, throughout this downturn, we’ve demonstrated the stability and cash generating power of our business, repaying $314 million in debt and returning $178 million to shareholders since the end of 2019.
“We also achieved several important technology milestones in 2021, completing the installation of expanded telematics across our fleet, launching a suite of leading-edge mobile tools for our field service technicians and migrating key support functions to our new cloud-based ERP system. These milestones reflect years of effort to radically transform our business to ensure our franchise is prepared for energy transition. With our optimized, standardized and digitized business, we are at an exciting inflection point. And, as we enter the multi-year upcycle in natural gas that we see ahead, we are invested in leveraging the strong foundation of our core compression business and evaluating complementary opportunities to help our customers decarbonize.
“Looking at 2022 capital allocation, having completed nearly $250 million in strategic divestments over the last three years, together with the opportunity to invest in high-profit, large midstream compressors, our ability to drive higher-quality EBITDA growth is accelerating. Our commitment to strong returns and reducing our emissions footprint are driving our investment strategy as we grow prudently with our customers. As such, we expect approximately 25% of our growth capex budget to fund expansion of our electric motor-drive horsepower. Finally, we are confident that the strength of our cash flows will continue to fund our well-covered and competitive dividend and allow us to maintain a healthy balance sheet,” concluded Childers.
Fourth Quarter and Full Year 2021 Financial Results
Archrock’s fourth quarter 2021 net income of $6.0 million included a pre-tax non-cash long-lived and other asset impairment of $6.2 million, a pre-tax insurance settlement related to damages to facilities and compressors caused by Hurricane Ida of $2.8 million and pre-tax restructuring costs of $950,000. Archrock’s fourth quarter 2020 net income of $4.8 million included a pre-tax non-cash long-lived and other asset impairment of $7.4 million and pre-tax restructuring costs totaling $1.4 million.
Adjusted EBITDA for the fourth quarter of 2021 of $83.5 million included $0.7 million in net gains related to the sale of compression and other assets. Adjusted EBITDA for the fourth quarter of 2020 of $88.7 million included $430,000 in net losses related to the sale of compression and other assets.
Archrock’s full year 2021 net income of $28.2 million included the following pre-tax items: non-cash long-lived and other asset impairment of $21.4 million, restructuring costs related to severance and property exit and disposals totaling $2.9 million, a non-cash write-off of unamortized deferred financing costs of $4.9 million, non-cash depreciation expense from the write-off of assets damaged in Hurricane Ida of $2.0 million and a non-income-based tax benefit of $2.5 million. Archrock’s full year 2020 net loss of $68.4 million included the following pre-tax items: non-cash impairment of the remaining $99.8 million of goodwill associated with the 2019 Elite Compression acquisition, non-cash long-lived and other asset impairments of $79.6 million, restructuring costs related to severance and property disposals totaling $8.5 million and a net benefit from tax audit settlements of $10.9 million.
Adjusted EBITDA for the full year 2021 and 2020 included $30.3 million and $10.6 million, respectively, in net gains related to the sale of compression and other assets.
Contract Operations
For the fourth quarter of 2021, contract operations segment revenue totaled $159.5 million compared to $158.9 million in the third quarter of 2021 and $168.8 million in the fourth quarter of 2020. Gross margin was $99.0 million, compared to $97.6 million in the third quarter of 2021 and $110.2 million in the fourth quarter of 2020. This reflected a gross margin percentage of 62%, compared to 61% in the third quarter of 2021 and 65% in the prior year quarter. Total operating horsepower at the end of the fourth quarter of 2021 was 3.2 million, up 51,000 horsepower from the end of the third quarter of 2021 and compared to 3.4 million at the end of the prior year quarter. The annual decline reflected the sale of 147,000 active horsepower as part of our ongoing fleet high-grading initiative. Utilization at the end of the fourth quarter of 2021 was 84%, compared to 82% at both the end of the third quarter of 2021 and the end of the fourth quarter of 2020.
Aftermarket Services
For the fourth quarter of 2021, aftermarket services segment revenue totaled $35.7 million, compared to $36.3 million in the third quarter of 2021 due to a seasonal slowdown. Fourth quarter 2021 aftermarket services revenue was up from $30.6 million in the fourth quarter of 2020, driven by higher parts sales and service activity. Gross margin of $5.2 million compared to $5.6 million in the third quarter of 2021 and was up from $3.8 million in the fourth quarter of 2020. Gross margin percentage was 15%, flat compared to the third quarter of 2021 and up from 13% in the prior year quarter.
Balance Sheet
Long-term debt was $1.5 billion at December 31, 2021, reflecting net debt repayment of $158.5 million for the full year 2021. Our leverage ratio was 4.3x, compared to 4.2x as of December 31, 2020. Our available liquidity totaled $502.5 million as of December 31, 2021.
Quarterly Dividend
Our Board of Directors recently declared a quarterly dividend of $0.145 per share of common stock, or $0.58 per share on an annualized basis, resulting in dividend coverage in the fourth quarter of 2021 of 2.0x. The dividend was paid on February 15, 2022 to stockholders of record at the close of business on February 8, 2022.
2022 Annual Guidance
Archrock is providing annual guidance as listed below. All figures are in thousands, except percentages and ratios:
Full Year 2022 Guidance | |||||||
Low | High | ||||||
Net income (1) | $ | 15,000 | $ | 55,000 | |||
Adjusted EBITDA (2) | 320,000 | 360,000 | |||||
Cash available for dividend (3)(4) | 163,000 | 181,000 | |||||
Segment | |||||||
Contract operations revenue | $ | 660,000 | $ | 690,000 | |||
Contract operations gross margin percentage | 60 | % | 62 | % | |||
Aftermarket services revenue | $ | 140,000 | $ | 155,000 | |||
Aftermarket services gross margin percentage | 16 | % | 18 | % | |||
Selling, general and administrative | $ | 113,000 | $ | 115,000 | |||
Capital expenditures | |||||||
Growth capital expenditures | $ | 150,000 | $ | 150,000 | |||
Maintenance capital expenditures | 55,000 | 75,000 | |||||
Other capital expenditures | 8,000 | 10,000 | |||||
(1) 2022 annual guidance for net income does not include the impact of long-lived and other asset impairment because due to its nature, it cannot be accurately forecasted. Long-lived and other asset impairment does not impact Adjusted EBITDA or cash available for dividend, however it is a reconciling item between these measures and net income. Long-lived and other asset impairment for the years 2021 and 2020 was $21.4 million and $79.6 million, respectively.
(2) Management believes Adjusted EBITDA provides useful information to investors because this non-GAAP measure, when viewed with our GAAP results and accompanying reconciliations, provides a more complete understanding of our performance than GAAP results alone. Management uses this non-GAAP measure as a supplemental measure to review current period operating performance, comparability measure and performance measure for period-to-period comparisons.
(3) Management uses cash available for dividend as a supplemental performance measure to compute the coverage ratio of estimated cash flows to planned dividends.
(4) A forward-looking estimate of cash provided by operating activities is not provided because certain items necessary to estimate cash provided by operating activities, including changes in assets and liabilities, are not estimable at this time. Changes in assets and liabilities were $(9.5) million and $19.1 million for the years 2021 and 2020, respectively.
Summary Metrics
(in thousands, except percentages, per share amounts and ratios)
Three Months Ended | Year Ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | ||||||||||||||||
2021 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
Net income (loss) | $ | 5,992 | $ | 9,304 | $ | 4,791 | $ | 28,217 | $ | (68,445 | ) | |||||||||
Adjusted EBITDA | $ | 83,499 | $ | 92,351 | $ | 88,712 | $ | 360,809 | $ | 414,770 | ||||||||||
Contract operations revenue | $ | 159,501 | $ | 158,911 | $ | 168,772 | $ | 648,311 | $ | 738,918 | ||||||||||
Contract operations gross margin | $ | 99,047 | $ | 97,631 | $ | 110,170 | $ | 403,825 | $ | 477,831 | ||||||||||
Contract operations gross margin percentage | 62 | % | 61 | % | 65 | % | 62 | % | 65 | % | ||||||||||
Aftermarket services revenue | $ | 35,748 | $ | 36,255 | $ | 30,554 | $ | 133,150 | $ | 136,052 | ||||||||||
Aftermarket services gross margin | $ | 5,242 | $ | 5,603 | $ | 3,834 | $ | 18,719 | $ | 19,946 | ||||||||||
Aftermarket services gross margin percentage | 15 | % | 15 | % | 13 | % | 14 | % | 15 | % | ||||||||||
Selling, general, and administrative | $ | 27,167 | $ | 28,839 | $ | 27,048 | $ | 107,167 | $ | 105,100 | ||||||||||
Cash available for dividend | $ | 45,545 | $ | 50,128 | $ | 56,311 | $ | 199,838 | $ | 253,707 | ||||||||||
Cash available for dividend coverage | 2.0 | x | 2.2 | x | 2.5 | x | 2.2 | x | 2.9 | x | ||||||||||
Free cash flow | $ | 6,928 | $ | 120,828 | $ | 65,408 | 253,507 | 250,247 | ||||||||||||
Free cash flow after dividend | $ | (15,423 | ) | $ | 98,322 | $ | 43,231 | 164,164 | 161,415 | |||||||||||
Total available horsepower (at period end) | 3,878 | 3,913 | 4,120 | |||||||||||||||||
Total operating horsepower (at period end) | 3,247 | 3,196 | 3,388 | |||||||||||||||||
Horsepower utilization spot (at period end) | 84 | % | 82 | % | 82 | % | ||||||||||||||
Conference Call Details
Archrock will host a conference call on Wednesday, February 23, 2022, to discuss fourth quarter and full year 2021 financial results and 2022 guidance. The call will begin at 10:00 a.m. Eastern Time.
To listen to the call via a live webcast, please visit Archrock’s website at www.archrock.com. The call will also be available by dialing 1-888-440-5667 in the United States and Canada or 1-646-960-0476 for international calls. The access code is 4749623.
A replay of the webcast will be available on Archrock’s website for 90 days following the event.
Adjusted EBITDA, a non-GAAP measure, is defined as net income (loss) excluding interest expense, income taxes, depreciation and amortization, long-lived and other asset impairment, goodwill impairment, restructuring charges, debt extinguishment loss, non-cash stock-based compensation expense, indemnification income (expense), net and other items. A reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP measure, and a reconciliation of our full year 2022 Adjusted EBITDA guidance to net income (loss) appear below.
Gross margin, a non-GAAP measure, is defined as revenue less cost of sales (excluding depreciation and amortization). Gross margin percentage is defined as gross margin divided by revenue. A reconciliation of gross margin to net income (loss), the most directly comparable GAAP measure, appears below.
Cash available for dividend, a non-GAAP measure, is defined as net income (loss) excluding interest expense, income taxes, depreciation and amortization, long-lived and other asset impairment, goodwill impairment, restructuring charges, debt extinguishment loss, non-cash stock-based compensation expense, indemnification income (expense), net and other items, less maintenance capital expenditures, other capital expenditures, cash taxes and cash interest expense. Reconciliations of cash available for dividend to net income (loss) and net cash provided by operating activities, the most directly comparable GAAP measures, appear below.
Free cash flow, a non-GAAP measure, is defined as net cash provided by operating activities plus net cash provided by (used in) investing activities. A reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable GAAP measure, appears below.
Free cash flow after dividend, a non-GAAP measure, is defined as net cash provided by operating activities plus net cash provided by (used in) investing activities less dividends paid to stockholders. A reconciliation of free cash flow after dividend to net cash provided by operating activities, the most directly comparable GAAP measure, appears below.
About Archrock
Archrock is an energy infrastructure company with a pure-play focus on midstream natural gas compression. Archrock is the leading provider of natural gas compression services to customers in the oil and natural gas industry throughout the U.S. and a leading supplier of aftermarket services to customers that own compression equipment in the U.S. Archrock is headquartered in Houston, Texas. For more information, please visit www.archrock.com.
Forward-Looking Statements
All statements in this release (and oral statements made regarding the subjects of this release) other than historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and factors that could cause actual results to differ materially from such statements, many of which are outside the control of Archrock, Inc. Forward-looking information includes, but is not limited to statements regarding: the effects of the COVID-19 pandemic on our business, operations, customers and financial conditions; guidance or estimates related to Archrock’s results of operations or of financial condition; fundamentals of Archrock’s industry, including the attractiveness of returns and valuation, stability of cash flows, demand dynamics and overall outlook, and Archrock’s ability to realize the benefits thereof; Archrock’s expectations regarding future economic and market conditions and trends; Archrock’s operational and financial strategies, including planned growth, coverage and leverage reduction strategies, Archrock’s ability to successfully effect those strategies and the expected results therefrom; Archrock’s financial and operational outlook; demand and growth opportunities for Archrock’s services; structural and process improvement initiatives, the expected timing thereof, Archrock’s ability to successfully effect those initiatives and the expected results therefrom; the operational and financial synergies provided by Archrock’s size; and statements regarding Archrock’s dividend policy.
While Archrock believes that the assumptions concerning future events are reasonable, it cautions that there are inherent difficulties in predicting certain important factors that could impact the future performance or results of its business. The factors that could cause results to differ materially from those indicated by such forward-looking statements include, but are not limited to: changes in customer, employee or supplier relationships; local, regional and national economic and financial market conditions and the impact they may have on Archrock and its customers; changes in tax laws; conditions in the oil and gas industry, including a sustained decrease in the level of supply or demand for oil or natural gas or a sustained decrease in the price of oil or natural gas; changes in economic conditions in key operating markets; impacts of world events, including the COVID-19 pandemic; the financial condition of Archrock’s customers; the failure of any customer to perform its contractual obligations; changes in safety, health, environmental and other regulations; and the effectiveness of Archrock’s control environment, including the identification of control deficiencies.
These forward-looking statements are also affected by the risk factors, forward-looking statements and challenges and uncertainties described in Archrock’s Annual Report on Form 10-K for the year ended December 31, 2020, Archrock’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021, June 30, 2021 and September 30, 2021, and those set forth from time to time in Archrock’s filings with the Securities and Exchange Commission, which are available at www.archrock.com. Except as required by law, Archrock expressly disclaims any intention or obligation to revise or update any forward-looking statements whether as a result of new information, future events or otherwise.
SOURCE: Archrock, Inc.
For information, contact:
Megan Repine
VP of Investor Relations
281-836-8360
investor.relations@archrock.com
Archrock, Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Three Months Ended | Year Ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | ||||||||||||||||
2021 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
Revenue: | ||||||||||||||||||||
Contract operations | $ | 159,501 | $ | 158,911 | $ | 168,772 | $ | 648,311 | $ | 738,918 | ||||||||||
Aftermarket services | 35,748 | 36,255 | 30,554 | 133,150 | 136,052 | |||||||||||||||
Total revenue | 195,249 | 195,166 | 199,326 | 781,461 | 874,970 | |||||||||||||||
Cost of sales (excluding depreciation and amortization): | ||||||||||||||||||||
Contract operations | 60,454 | 61,280 | 58,602 | 244,486 | 261,087 | |||||||||||||||
Aftermarket services | 30,506 | 30,652 | 26,720 | 114,431 | 116,106 | |||||||||||||||
Total cost of sales (excluding depreciation and amortization) | 90,960 | 91,932 | 85,322 | 358,917 | 377,193 | |||||||||||||||
Selling, general and administrative | 27,167 | 28,839 | 27,048 | 107,167 | 105,100 | |||||||||||||||
Depreciation and amortization | 43,761 | 45,280 | 47,188 | 178,946 | 193,138 | |||||||||||||||
Long-lived and other asset impairment | 6,243 | 5,121 | 7,424 | 21,397 | 79,556 | |||||||||||||||
Goodwill impairment | — | — | — | — | 99,830 | |||||||||||||||
Restructuring charges | 950 | 313 | 1,414 | 2,903 | 8,450 | |||||||||||||||
Interest expense | 25,424 | 25,508 | 25,052 | 108,135 | 105,716 | |||||||||||||||
Debt extinguishment loss | — | — | — | — | 3,971 | |||||||||||||||
(Gain) loss on sale of assets, net | (709 | ) | (15,393 | ) | 430 | (30,258 | ) | (10,643 | ) | |||||||||||
Other (income) expense, net | (3,073 | ) | 337 | (42 | ) | (4,707 | ) | (1,359 | ) | |||||||||||
Income (loss) before income taxes | 4,526 | 13,229 | 5,490 | 38,961 | (85,982 | ) | ||||||||||||||
Provision for (benefit from) income taxes | (1,466 | ) | 3,925 | 699 | 10,744 | (17,537 | ) | |||||||||||||
Net income (loss) | $ | 5,992 | $ | 9,304 | $ | 4,791 | $ | 28,217 | $ | (68,445 | ) | |||||||||
Basic and diluted net income (loss) per common share (1) | $ | 0.04 | $ | 0.06 | $ | 0.03 | $ | 0.18 | $ | (0.46 | ) | |||||||||
Weighted average common shares outstanding: | ||||||||||||||||||||
Basic | 152,320 | 152,158 | 151,161 | 151,684 | 150,828 | |||||||||||||||
Diluted | 152,442 | 152,297 | 151,215 | 151,830 | 150,828 | |||||||||||||||
(1) Basic and diluted net income (loss) per common share is computed using the two-class method to determine the net income per share for each class of common stock and participating security (restricted stock and stock-settled restricted stock units that have non-forfeitable rights to receive dividends or dividend equivalents) according to dividends declared and participation rights in undistributed earnings. Accordingly, we have excluded net income attributable to participating securities from our calculation of basic and diluted net income per common share.
Archrock, Inc.
Unaudited Supplemental Information
(in thousands, except percentages, per share amounts and ratios)
Three Months Ended | Year Ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | ||||||||||||||||
2021 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
Revenue: | ||||||||||||||||||||
Contract operations | $ | 159,501 | $ | 158,911 | $ | 168,772 | $ | 648,311 | $ | 738,918 | ||||||||||
Aftermarket services | 35,748 | 36,255 | 30,554 | 133,150 | 136,052 | |||||||||||||||
Total revenue | $ | 195,249 | $ | 195,166 | $ | 199,326 | $ | 781,461 | $ | 874,970 | ||||||||||
Gross margin (1): | ||||||||||||||||||||
Contract operations | $ | 99,047 | $ | 97,631 | $ | 110,170 | $ | 403,825 | $ | 477,831 | ||||||||||
Aftermarket services | 5,242 | 5,603 | 3,834 | 18,719 | 19,946 | |||||||||||||||
Total gross margin | $ | 104,289 | $ | 103,234 | $ | 114,004 | $ | 422,544 | $ | 497,777 | ||||||||||
Gross margin percentage: | ||||||||||||||||||||
Contract operations | 62 | % | 61 | % | 65 | % | 62 | % | 65 | % | ||||||||||
Aftermarket services | 15 | % | 15 | % | 13 | % | 14 | % | 15 | % | ||||||||||
Total gross margin percentage | 53 | % | 53 | % | 57 | % | 54 | % | 57 | % | ||||||||||
Selling, general and administrative | $ | 27,167 | $ | 28,839 | $ | 27,048 | $ | 107,167 | $ | 105,100 | ||||||||||
% of revenue | 14 | % | 15 | % | 14 | % | 14 | % | 12 | % | ||||||||||
Adjusted EBITDA (1) | $ | 83,499 | $ | 92,351 | $ | 88,712 | $ | 360,809 | $ | 414,770 | ||||||||||
% of revenue | 43 | % | 47 | % | 45 | % | 46 | % | 47 | % | ||||||||||
Capital expenditures | $ | 27,004 | $ | 32,132 | $ | 9,959 | $ | 97,885 | $ | 140,302 | ||||||||||
Proceeds from sale of property, plant and equipment and other assets | (5,149 | ) | (70,785 | ) | (5,605 | ) | (112,907 | ) | (52,562 | ) | ||||||||||
Net capital expenditures | $ | 21,855 | $ | (38,653 | ) | $ | 4,354 | $ | (15,022 | ) | $ | 87,740 | ||||||||
Total available horsepower (at period end) (2) | 3,878 | 3,913 | 4,120 | 3,878 | 4,120 | |||||||||||||||
Total operating horsepower (at period end) (3) | 3,247 | 3,196 | 3,388 | 3,247 | 3,388 | |||||||||||||||
Average operating horsepower | 3,220 | 3,225 | 3,423 | 3,282 | 3,657 | |||||||||||||||
Horsepower utilization: | ||||||||||||||||||||
Spot (at period end) | 84 | % | 82 | % | 82 | % | 84 | % | 82 | % | ||||||||||
Average | 83 | % | 82 | % | 83 | % | 82 | % | 86 | % | ||||||||||
Dividend declared for the period per share | $ | 0.145 | $ | 0.145 | $ | 0.145 | $ | 0.580 | $ | 0.580 | ||||||||||
Dividend declared for the period to all shareholders | $ | 22,598 | $ | 22,393 | $ | 22,192 | $ | 89,590 | $ | 88,853 | ||||||||||
Cash available for dividend coverage (4) | 2.0 | x | 2.2 | x | 2.5 | x | 2.2 | x | 2.9 | x | ||||||||||
Free cash flow (5) | $ | 6,928 | $ | 120,828 | $ | 65,408 | $ | 253,507 | $ | 250,247 | ||||||||||
Free cash flow after dividend (5) | $ | (15,423 | ) | $ | 98,322 | $ | 43,231 | $ | 164,164 | $ | 161,415 | |||||||||
(1) Management believes gross margin and Adjusted EBITDA provide useful information to investors because these non-GAAP measures, when viewed with our GAAP results and accompanying reconciliations, provide a more complete understanding of our performance than GAAP results alone. Management uses these non-GAAP measures as supplemental measures to review current period operating performance, comparability measures and performance measures for period-to-period comparisons.
(2) Defined as idle and operating horsepower, and includes new compressor units completed by a third party manufacturer that have been delivered to us.
(3) Defined as horsepower that is operating under contract and horsepower that is idle but under contract and generating revenue such as standby revenue.
(4) Defined as cash available for dividend divided by dividends declared for the period.
(5) Management believes free cash flow and free cash flow after dividend provide useful information to investors because these non-GAAP measures, when viewed with our GAAP results and accompanying reconciliations, provide a more complete understanding of our performance and the amount of cash that is available for dividends, debt repayment and other general corporate purposes.
December 31, | September 30, | December 31, | |||||||
2021 | 2021 | 2020 | |||||||
Balance Sheet | |||||||||
Long-term debt (1) | $ | 1,530,825 | $ | 1,516,135 | $ | 1,688,867 | |||
Total equity | 891,438 | 904,047 | 935,557 | ||||||
(1) Carrying values are shown net of unamortized debt premium and deferred financing costs.
Archrock, Inc.
Unaudited Supplemental Information
(in thousands)
Three Months Ended | Year Ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | ||||||||||||||||
2021 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
Reconciliation of Net Income (Loss) to Adjusted EBITDA and Gross Margin | ||||||||||||||||||||
Net income (loss) | $ | 5,992 | $ | 9,304 | $ | 4,791 | $ | 28,217 | $ | (68,445 | ) | |||||||||
Depreciation and amortization | 43,761 | 45,280 | 47,188 | 178,946 | 193,138 | |||||||||||||||
Long-lived and other asset impairment | 6,243 | 5,121 | 7,424 | 21,397 | 79,556 | |||||||||||||||
Goodwill impairment | — | — | — | — | 99,830 | |||||||||||||||
Restructuring charges | 950 | 313 | 1,414 | 2,903 | 8,450 | |||||||||||||||
Interest expense | 25,424 | 25,508 | 25,052 | 108,135 | 105,716 | |||||||||||||||
Debt extinguishment loss | — | — | — | — | 3,971 | |||||||||||||||
Stock-based compensation expense | 2,595 | 2,900 | 2,128 | 11,336 | 10,551 | |||||||||||||||
Indemnification (income) expense, net (1) | — | — | 16 | (869 | ) | (460 | ) | |||||||||||||
Provision for (benefit from) income taxes | (1,466 | ) | 3,925 | 699 | 10,744 | (17,537 | ) | |||||||||||||
Adjusted EBITDA (2) | 83,499 | 92,351 | 88,712 | 360,809 | 414,770 | |||||||||||||||
Selling, general and administrative | 27,167 | 28,839 | 27,048 | 107,167 | 105,100 | |||||||||||||||
Stock-based compensation expense | (2,595 | ) | (2,900 | ) | (2,128 | ) | (11,336 | ) | (10,551 | ) | ||||||||||
Indemnification income (expense), net (1) | — | — | (16 | ) | 869 | 460 | ||||||||||||||
(Gain) loss on sale of assets, net | (709 | ) | (15,393 | ) | 430 | (30,258 | ) | (10,643 | ) | |||||||||||
Other (income) expense, net | (3,073 | ) | 337 | (42 | ) | (4,707 | ) | (1,359 | ) | |||||||||||
Gross margin (2) | $ | 104,289 | $ | 103,234 | $ | 114,004 | $ | 422,544 | $ | 497,777 | ||||||||||
(1) Represents the net income earned or net expense incurred pursuant to indemnification provisions of our separation and distribution and tax matters agreements with Exterran Corporation.
(2) Management believes Adjusted EBITDA and gross margin provide useful information to investors because these non-GAAP measures, when viewed with our GAAP results and accompanying reconciliations, provide a more complete understanding of our performance than GAAP results alone. Management uses these non-GAAP measures as supplemental measures to review current period operating performance, comparability measures and performance measures for period-to-period comparisons.
Archrock, Inc.
Unaudited Supplemental Information
(in thousands)
Three Months Ended | Year Ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | ||||||||||||||||
2021 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
Reconciliation of Net Income (Loss) to Adjusted EBITDA and Cash Available for Dividend | ||||||||||||||||||||
Net income (loss) | $ | 5,992 | $ | 9,304 | $ | 4,791 | $ | 28,217 | $ | (68,445 | ) | |||||||||
Depreciation and amortization | 43,761 | 45,280 | 47,188 | 178,946 | 193,138 | |||||||||||||||
Long-lived and other asset impairment | 6,243 | 5,121 | 7,424 | 21,397 | 79,556 | |||||||||||||||
Goodwill impairment | — | — | — | — | 99,830 | |||||||||||||||
Restructuring charges | 950 | 313 | 1,414 | 2,903 | 8,450 | |||||||||||||||
Interest expense | 25,424 | 25,508 | 25,052 | 108,135 | 105,716 | |||||||||||||||
Debt extinguishment loss | — | — | — | — | 3,971 | |||||||||||||||
Stock-based compensation expense | 2,595 | 2,900 | 2,128 | 11,336 | 10,551 | |||||||||||||||
Indemnification (income) expense, net | — | — | 16 | (869 | ) | (460 | ) | |||||||||||||
Provision for (benefit from) income taxes | (1,466 | ) | 3,925 | 699 | 10,744 | (17,537 | ) | |||||||||||||
Adjusted EBITDA (1) | 83,499 | 92,351 | 88,712 | 360,809 | 414,770 | |||||||||||||||
Less: Maintenance capital expenditures | (11,883 | ) | (14,086 | ) | (4,019 | ) | (47,346 | ) | (31,958 | ) | ||||||||||
Less: Other capital expenditures | (1,789 | ) | (3,430 | ) | (4,763 | ) | (13,376 | ) | (29,214 | ) | ||||||||||
Less: Cash tax refund (payment) | 358 | — | 118 | (247 | ) | (94 | ) | |||||||||||||
Less: Cash interest expense | (24,640 | ) | (24,707 | ) | (23,737 | ) | (100,002 | ) | (99,797 | ) | ||||||||||
Cash available for dividend (2) | $ | 45,545 | $ | 50,128 | $ | 56,311 | $ | 199,838 | $ | 253,707 | ||||||||||
(1) Management believes Adjusted EBITDA provides useful information to investors because this non-GAAP measure, when viewed with our GAAP results and accompanying reconciliations, provides a more complete understanding of our performance than GAAP results alone. Management uses this non-GAAP measure as a supplemental measure to review current period operating performance, comparability measure and performance measure for period-to-period comparisons.
(2) Management uses cash available for dividend as a supplemental performance measure to compute the coverage ratio of estimated cash flows to planned dividends.
Archrock, Inc.
Unaudited Supplemental Information
(in thousands)
Three Months Ended | Year Ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | ||||||||||||||||
2021 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
Reconciliation of Cash Flows From Operating Activities to Cash Available for Dividend | ||||||||||||||||||||
Net cash provided by operating activities | $ | 28,675 | $ | 82,108 | $ | 68,444 | $ | 237,400 | $ | 335,278 | ||||||||||
Inventory write-downs | (376 | ) | (110 | ) | (434 | ) | (997 | ) | (1,349 | ) | ||||||||||
Provision for credit losses | 241 | (366 | ) | (1,290 | ) | 90 | (3,525 | ) | ||||||||||||
Gain (loss) on sale of assets, net | 709 | 15,393 | (430 | ) | 30,258 | 10,643 | ||||||||||||||
Current income tax provision (benefit) | (67 | ) | 142 | 175 | 365 | 227 | ||||||||||||||
Cash tax refund (payment) | 358 | — | 118 | (247 | ) | (94 | ) | |||||||||||||
Amortization of operating lease ROU assets | (958 | ) | (1,031 | ) | (922 | ) | (3,880 | ) | (3,477 | ) | ||||||||||
Amortization of contract costs | (4,467 | ) | (4,771 | ) | (6,343 | ) | (19,990 | ) | (26,629 | ) | ||||||||||
Deferred revenue recognized in earnings | 2,301 | 3,033 | 2,306 | 10,382 | 19,489 | |||||||||||||||
Cash restructuring charges | 950 | 313 | 1,414 | 2,903 | 6,790 | |||||||||||||||
Indemnification (income) expense, net | — | — | 16 | (869 | ) | (460 | ) | |||||||||||||
Changes in assets and liabilities | 32,958 | (25,953 | ) | 3,099 | 9,535 | (19,098 | ) | |||||||||||||
Maintenance capital expenditures | (11,883 | ) | (14,086 | ) | (4,019 | ) | (47,346 | ) | (31,958 | ) | ||||||||||
Other capital expenditures | (1,789 | ) | (3,430 | ) | (4,763 | ) | (13,376 | ) | (29,214 | ) | ||||||||||
Payments for settlement of interest rate swaps that include financing elements | (1,107 | ) | (1,114 | ) | (1,060 | ) | (4,390 | ) | (2,916 | ) | ||||||||||
Cash available for dividend (1) | $ | 45,545 | $ | 50,128 | $ | 56,311 | $ | 199,838 | $ | 253,707 | ||||||||||
(1) Management uses cash available for dividend as a supplemental performance measure to compute the coverage ratio of estimated cash flows to planned dividends.
Archrock, Inc.
Unaudited Supplemental Information
(in thousands)
Three Months Ended | Year Ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | ||||||||||||||||
2021 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
Reconciliation of Cash Flows From Operating Activities to Free Cash Flow and Free Cash Flow After Dividend | ||||||||||||||||||||
Net cash provided by operating activities | $ | 28,675 | $ | 82,108 | $ | 68,444 | $ | 237,400 | $ | 335,278 | ||||||||||
Net cash provided by (used in) investing activities | (21,747 | ) | 38,720 | (3,036 | ) | 16,107 | (85,031 | ) | ||||||||||||
Free cash flow (1) | 6,928 | 120,828 | 65,408 | 253,507 | 250,247 | |||||||||||||||
Dividends paid to stockholders | (22,351 | ) | (22,506 | ) | (22,177 | ) | (89,343 | ) | (88,832 | ) | ||||||||||
Free cash flow after dividend (1) | $ | (15,423 | ) | $ | 98,322 | $ | 43,231 | $ | 164,164 | $ | 161,415 | |||||||||
(1) Management believes free cash flow and free cash flow after dividend provide useful information to investors because these non-GAAP measures, when viewed with our GAAP results and accompanying reconciliations, provide a more complete understanding of our performance and the amount of cash that is available for dividends, debt repayment and other general corporate purposes.
Archrock, Inc.
Unaudited Supplemental Information
(in thousands)
Annual Guidance Range | ||||||||
2022 | ||||||||
Low | High | |||||||
Reconciliation of Net Income to Adjusted EBITDA and Cash Available for Dividend | ||||||||
Net income (1) | $ | 15,000 | $ | 55,000 | ||||
Depreciation and amortization | 179,000 | 179,000 | ||||||
Interest expense | 98,000 | 98,000 | ||||||
Stock-based compensation expense | 11,000 | 11,000 | ||||||
Provision for income taxes | 17,000 | 17,000 | ||||||
Adjusted EBITDA (2) | 320,000 | 360,000 | ||||||
Less: Maintenance capital expenditures | 55,000 | 75,000 | ||||||
Less: Other capital expenditures | 8,000 | 10,000 | ||||||
Less: Cash tax refund | (1,000 | ) | (1,000 | ) | ||||
Less: Cash interest expense | 95,000 | 95,000 | ||||||
Cash available for dividend (3)(4) | $ | 163,000 | $ | 181,000 | ||||
(1) 2022 annual guidance for net income does not include the impact of long-lived and other asset impairment because due to its nature, it cannot be accurately forecasted. Long-lived and other asset impairment does not impact Adjusted EBITDA or cash available for dividend, however it is a reconciling item between these measures and net income. Long-lived and other asset impairment for the years 2021 and 2020 was $21.4 million and $79.6 million, respectively.
(2) Management believes Adjusted EBITDA provides useful information to investors because this non-GAAP measure, when viewed with our GAAP results and accompanying reconciliations, provides a more complete understanding of our performance than GAAP results alone. Management uses this non-GAAP measure as a supplemental measure to review current period operating performance, comparability measure and performance measure for period-to-period comparisons.
(3) Management uses cash available for dividend as a supplemental performance measure to compute the coverage ratio of estimated cash flows to planned dividends.
(4) A forward-looking estimate of cash provided by operating activities is not provided because certain items necessary to estimate cash provided by operating activities, including changes in assets and liabilities, are not estimable at this time. Changes in assets and liabilities were $(9.5) million and $19.1 million for the years 2021 and 2020, respectively.
